Processing Your Payment
Please do not leave this page until complete. This can take a few moments.
April 18, 2005
A rebuilding year | Maine Military Authority finds a niche repairing vehicles and equipment for the Department of Defense
By Taylor Smith
In 1994, when the U.S. Air Force closed the Loring Air Force Base, an 8,700-acre facility in Limestone, it left behind millions of dollars worth of gear. In addition to the base's massive infrastructure ˆ roughly 150 main buildings are scattered around the grounds ˆ the Air Force left hundreds of vehicles, from snow plows to forklifts. Fully operational machine shops and mechanic bays sat idle, packed with tools and pricey equipment.
Just three years later, Gary Cleaves, an Aroostook County native and long-time member of the Maine National Guard, began looking for a home for the fledgling Maine Military Authority, which he had started in earnest after landing a $500,000 contract to rebuild and refit 25 Humvee tactical vehicles for the National Guard. With nine Guardsmen as his first employees, Cleaves set up shop in a 67,000-square-foot building at Loring and began work. By the end of 1997, he had hired 25 more workers, from general mechanics to transmission specialists and body shop experts. In that first year, MMA completed all 25 bumper-to-bumper Humvee rebuilds, stripping each vehicle of its components and fixing damaged radiators or dinged-up piston arms, then reattaching the repaired parts to a refurbished chassis and body. "Since then," says Cleaves, "we've just had continual growth."
During the past nine years, MMA has grown to an operation with more than 450 personnel ˆ from administrative workers and parts buyers to expert metal fabricators and engine specialists ˆ scattered among eight buildings with roughly 450,000 sq. ft. of working space. During that time the workers have rebuilt well over 3,000 Humvees, sent to Loring from National Guard locations in the United States, military outposts in southeast Asia and Europe, and battle zones such as Iraq and Afghanistan.
Meanwhile, Cleaves has bolstered MMA's relationship with the military, adding a handful of new Humvee contracts from the National Guard and beginning work for the U.S. Army. In December, MMA announced its first contract with the U.S. Army's Tank-automotive and Armaments Command, or TACOM, to store military vehicles and refit more than 1,000 Humvees at a cost of $39.3 million.
As a result, MMA quickly has become the largest employer at Loring. Production has doubled annually for each of the last three years, and Cleaves estimates that by the end of the year MMA will employ more than 600 people and increase its production to 140 completed vehicles a month, from 115. Meanwhile, the value of MMA's contracts has grown significantly; this year, Cleaves says MMA has $70 million worth of work in seven contracts from the National Guard and the Army. Last year, MMA's contracts were worth $45 million.
With Maine's other defense-related facilities facing an uncertain future in light of changing federal priorities ˆ and, subsequently, budget allocations ˆ it stands to reason that MMA might be vulnerable, too. But Cleaves doesn't seem concerned with the uncertainties of defense budgets or whether the National Guard and the U.S. Army will keep awarding contracts. Nor is he worried that more outfits will begin competing for the handful of contracts on the table. MMA's niche, he says, lies in its efficiency, as well as in simple economics: It's cheaper for the military to recondition vehicles than to buy them new, something he says will sustain MMA even if defense budgets go south.
Manning the howitzers
Cleaves began laying the groundwork for MMA while he was working as a full-time mechanic at the Maine National Guard facility in Augusta. As a 35-year veteran of the Guard ˆ he retired in 2003 ˆ Cleaves over time saw how much money was being spent replacing old vehicles with newly purchased vehicles. The old vehicles, he reasoned, still had plenty of life in them, and with some careful work they could be restored to like-new condition. "Any mechanical vehicle can be rebuilt as long as the parts are available," he says.
In 1995 Cleaves learned the National Guard was requesting proposals from state facilities to rebuild a line of Humvees, and he made sure the Maine National Guard threw its hat in the ring. (The Humvee, or HMMWV for High Mobility Multi-Purpose Wheeled Vehicle, was introduced by South Bend, Ind.-based AM General for military use in the early 80s.) He spearheaded the project with his brother, Arthur, a fellow Guardsman who now serves as director of the Maine Emergency Management Agency. Together, they wrote a business proposal and pitched the idea to the Guard's top brass. Guard officials came to Maine shortly thereafter and met with the Cleaves brothers and members of the Loring Commerce Center, with whom the Cleaves had been in discussion since the Air Force vacated Loring.
When the results of the bidding process were announced, Maine came in fourth, behind Kansas, Mississippi and Texas, based on the state's available facilities and experience working on military vehicles. But Cleaves kept bidding for jobs and in 1997 MMA landed its first Humvee contract with the National Guard. Since then, he says MMA has established itself as one of the top refurbishment centers in the United States, and that the addition of MMA's contracts with the U.S. Army will continue to bolster that reputation.
According to Don Jarosz, a public affairs officer with the Army's TACOM division, the Army will need more than 4,500 Humvees refitted during each of the next five years. Though the bulk of the work is earmarked for the Red River Army Depot in Texarkana, Texas and the Letterkenny Army Depot in Chambersburg, Penn., Jarosz notes in an e-mailed statement that MMA was chosen to supplement those depots' work based on its reputation in the industry. Cleaves expects to perform 300 of the conversions this year. (MMA also will perform repair work on roughly 800 Humvees through another contract with the Army.) According to Jarosz, contracts to refit those Humvees will be divvied up between the Army depots and MMA "based on cost, level of funding available to meet this requirement, past deliveries and quality of product."
Carl Flora, president and CEO of the Loring Commerce Center, a subsidiary of the Loring Development Authority of Maine that manages operations at the former Air Force base, isn't surprised by MMA's fast-growing reputation in military circles. "They've been discovered. The broader military establishment has found out about this little gem up here in northern Maine," he says. "They've always been a good deal, but maybe with the war in Iraq and the press to get this work done timely and efficiently and in a cost-effective way, this place has had a chance to really shine."
That increased visibility for MMA isn't likely to translate into big profits, though. While MMA isn't a nonprofit organization, neither is it a for-profit concern. Cleaves, who serves as the general manager, characterizes MMA as a quasi-governmental agency; he says it's owned "by the entire state of Maine." Cleaves reports to Adj. Gen. John Libby, commander of the Maine Army National Guard, but employees effectively work for the state and receive benefits packages similar to all state workers. Since its first year of operation in 1997, the operation has never turned a profit or lost a dime. Instead, it receives in payment exactly what it takes to finish the job. With National Guard contracts, "it's a cooperative agreement," says Cleaves. "The National Guard funds everything, and they take the vehicle for whatever that price becomes."
This year, however, Cleaves says MMA may turn a profit thanks to its new Humvee contract. (MMA also has an Army contract worth roughly $200,000 to store and maintain vehicles such as howitzers and well-drilling trucks.) According to Cleaves, the Humvee work, in which MMA will refit vehicles bound for battle zones in Iraq with beefier suspensions and bigger engines to accommodate heavy armor plating, can be done quickly and more cost effectively than the MMA's typical Humvee rebuilding projects, opening the door for MMA to turn a profit on the project. "Everything has come out to zero at the end of the year," says Cleaves. "This year is the first year that we might make money, but any profit gets paid right back to the state."
From Humvees to school buses
But while MMA isn't plumping up its bottom line, it's pumping money back into the local economy through supply purchases and payroll. MMA tries to route its orders through local parts dealers whenever possible. Vicki Dube, MMA's director of finance and personnel, estimates that the outfit will spend roughly $20 million on parts from local dealers this year. Dube also pegs MMA's 2005 payroll at more than $23 million. That's big news, especially in the Limestone and Presque Isle area, where more than 1,000 workers lost their jobs when the Air Force base closed in 1994. During the past 11 years, the bulk of those jobs have been replaced by business expansion at the Loring Commerce Center. Cleaves expects MMA's employment rolls to reach 1,000 within the next three years.
Cleaves credits MMA's employees with helping expand the organization's reputation, which he says is directly responsible for bringing in more work. He characterizes the employees as extremely hard workers, and says they bring a level of ingenuity to the operation that helps keep costs down. "The big thing is the productivity of your people," says Cleaves. "The work ethic of people up here is amazing."
And saving money is MMA's best strategy for growth, says Cleaves, because low overhead allows the organization to offer attractive bids on contracts. He estimates his hourly rate is less than $40 ˆ roughly the same as the average neighborhood mechanic. Part of that is the efficiency of the workers, says Terry Susee, MMA's director of quality and training, but MMA workers also have figured out ways to trim the costs of rebuilding each vehicles. (See "Geared toward efficiency," p. 33.) For instance, five years ago MMA set up a decal shop where workers could recreate vehicle data plates and warning decals that might cost hundreds of dollars to purchase from an outside vendor. MMA's cost? "Pennies on the dollar," says Susee. And with a full metal fabrication shop, MMA employees have been manufacturing certain Humvee body parts and components that perform to specification, but cost just a fraction of what a company like AM General might charge. "Anything we can save money on, we do it," says Susee.
As a result, Cleaves says MMA can turn out a completely rebuilt Humvee ˆ from full-body teardown to fully stocked rebuild ˆ in three days at a cost of $24,000. That compares to a base price of $77,000 for a new Humvee. Meanwhile, rebuilding costs are considerably higher elsewhere: A recent article in National Defense magazine, the monthly journal of the Arlington, Va.-based National Defense Industrial Association, reported that refurbishing a Humvee through an Army depot like Red River costs an average of $39,000. "Nobody can beat us on an hourly rate," says Cleaves.
In addition to the military work, Cleaves also is looking for new ways to keep MMA growing. His newest plan is to tap the municipal market: He'd like MMA to be the official repair outfit for municipal plow fleets, and the place where Maine towns send their school buses when they need a major overhaul. He says he's tested the waters with the Maine Department of Education, and is currently working on proposals to submit to school departments and municipalities.
In the end, though, Cleaves isn't worried about the number of contracts MMA will receive from the National Guard and Army going forward. After all, he says the National Guard estimates 88,000 Humvees will need to be rebuilt and repaired during the next 15 years. In his view, the MMA is well positioned to be chosen for a portion of that work. "If the war was over tomorrow, the Army would stop buying new stuff," Cleaves says. "They'd have to repair the old stuff."
Just three years later, Gary Cleaves, an Aroostook County native and long-time member of the Maine National Guard, began looking for a home for the fledgling Maine Military Authority, which he had started in earnest after landing a $500,000 contract to rebuild and refit 25 Humvee tactical vehicles for the National Guard. With nine Guardsmen as his first employees, Cleaves set up shop in a 67,000-square-foot building at Loring and began work. By the end of 1997, he had hired 25 more workers, from general mechanics to transmission specialists and body shop experts. In that first year, MMA completed all 25 bumper-to-bumper Humvee rebuilds, stripping each vehicle of its components and fixing damaged radiators or dinged-up piston arms, then reattaching the repaired parts to a refurbished chassis and body. "Since then," says Cleaves, "we've just had continual growth."
During the past nine years, MMA has grown to an operation with more than 450 personnel ˆ from administrative workers and parts buyers to expert metal fabricators and engine specialists ˆ scattered among eight buildings with roughly 450,000 sq. ft. of working space. During that time the workers have rebuilt well over 3,000 Humvees, sent to Loring from National Guard locations in the United States, military outposts in southeast Asia and Europe, and battle zones such as Iraq and Afghanistan.
Meanwhile, Cleaves has bolstered MMA's relationship with the military, adding a handful of new Humvee contracts from the National Guard and beginning work for the U.S. Army. In December, MMA announced its first contract with the U.S. Army's Tank-automotive and Armaments Command, or TACOM, to store military vehicles and refit more than 1,000 Humvees at a cost of $39.3 million.
As a result, MMA quickly has become the largest employer at Loring. Production has doubled annually for each of the last three years, and Cleaves estimates that by the end of the year MMA will employ more than 600 people and increase its production to 140 completed vehicles a month, from 115. Meanwhile, the value of MMA's contracts has grown significantly; this year, Cleaves says MMA has $70 million worth of work in seven contracts from the National Guard and the Army. Last year, MMA's contracts were worth $45 million.
With Maine's other defense-related facilities facing an uncertain future in light of changing federal priorities ˆ and, subsequently, budget allocations ˆ it stands to reason that MMA might be vulnerable, too. But Cleaves doesn't seem concerned with the uncertainties of defense budgets or whether the National Guard and the U.S. Army will keep awarding contracts. Nor is he worried that more outfits will begin competing for the handful of contracts on the table. MMA's niche, he says, lies in its efficiency, as well as in simple economics: It's cheaper for the military to recondition vehicles than to buy them new, something he says will sustain MMA even if defense budgets go south.
Manning the howitzers
Cleaves began laying the groundwork for MMA while he was working as a full-time mechanic at the Maine National Guard facility in Augusta. As a 35-year veteran of the Guard ˆ he retired in 2003 ˆ Cleaves over time saw how much money was being spent replacing old vehicles with newly purchased vehicles. The old vehicles, he reasoned, still had plenty of life in them, and with some careful work they could be restored to like-new condition. "Any mechanical vehicle can be rebuilt as long as the parts are available," he says.
In 1995 Cleaves learned the National Guard was requesting proposals from state facilities to rebuild a line of Humvees, and he made sure the Maine National Guard threw its hat in the ring. (The Humvee, or HMMWV for High Mobility Multi-Purpose Wheeled Vehicle, was introduced by South Bend, Ind.-based AM General for military use in the early 80s.) He spearheaded the project with his brother, Arthur, a fellow Guardsman who now serves as director of the Maine Emergency Management Agency. Together, they wrote a business proposal and pitched the idea to the Guard's top brass. Guard officials came to Maine shortly thereafter and met with the Cleaves brothers and members of the Loring Commerce Center, with whom the Cleaves had been in discussion since the Air Force vacated Loring.
When the results of the bidding process were announced, Maine came in fourth, behind Kansas, Mississippi and Texas, based on the state's available facilities and experience working on military vehicles. But Cleaves kept bidding for jobs and in 1997 MMA landed its first Humvee contract with the National Guard. Since then, he says MMA has established itself as one of the top refurbishment centers in the United States, and that the addition of MMA's contracts with the U.S. Army will continue to bolster that reputation.
According to Don Jarosz, a public affairs officer with the Army's TACOM division, the Army will need more than 4,500 Humvees refitted during each of the next five years. Though the bulk of the work is earmarked for the Red River Army Depot in Texarkana, Texas and the Letterkenny Army Depot in Chambersburg, Penn., Jarosz notes in an e-mailed statement that MMA was chosen to supplement those depots' work based on its reputation in the industry. Cleaves expects to perform 300 of the conversions this year. (MMA also will perform repair work on roughly 800 Humvees through another contract with the Army.) According to Jarosz, contracts to refit those Humvees will be divvied up between the Army depots and MMA "based on cost, level of funding available to meet this requirement, past deliveries and quality of product."
Carl Flora, president and CEO of the Loring Commerce Center, a subsidiary of the Loring Development Authority of Maine that manages operations at the former Air Force base, isn't surprised by MMA's fast-growing reputation in military circles. "They've been discovered. The broader military establishment has found out about this little gem up here in northern Maine," he says. "They've always been a good deal, but maybe with the war in Iraq and the press to get this work done timely and efficiently and in a cost-effective way, this place has had a chance to really shine."
That increased visibility for MMA isn't likely to translate into big profits, though. While MMA isn't a nonprofit organization, neither is it a for-profit concern. Cleaves, who serves as the general manager, characterizes MMA as a quasi-governmental agency; he says it's owned "by the entire state of Maine." Cleaves reports to Adj. Gen. John Libby, commander of the Maine Army National Guard, but employees effectively work for the state and receive benefits packages similar to all state workers. Since its first year of operation in 1997, the operation has never turned a profit or lost a dime. Instead, it receives in payment exactly what it takes to finish the job. With National Guard contracts, "it's a cooperative agreement," says Cleaves. "The National Guard funds everything, and they take the vehicle for whatever that price becomes."
This year, however, Cleaves says MMA may turn a profit thanks to its new Humvee contract. (MMA also has an Army contract worth roughly $200,000 to store and maintain vehicles such as howitzers and well-drilling trucks.) According to Cleaves, the Humvee work, in which MMA will refit vehicles bound for battle zones in Iraq with beefier suspensions and bigger engines to accommodate heavy armor plating, can be done quickly and more cost effectively than the MMA's typical Humvee rebuilding projects, opening the door for MMA to turn a profit on the project. "Everything has come out to zero at the end of the year," says Cleaves. "This year is the first year that we might make money, but any profit gets paid right back to the state."
From Humvees to school buses
But while MMA isn't plumping up its bottom line, it's pumping money back into the local economy through supply purchases and payroll. MMA tries to route its orders through local parts dealers whenever possible. Vicki Dube, MMA's director of finance and personnel, estimates that the outfit will spend roughly $20 million on parts from local dealers this year. Dube also pegs MMA's 2005 payroll at more than $23 million. That's big news, especially in the Limestone and Presque Isle area, where more than 1,000 workers lost their jobs when the Air Force base closed in 1994. During the past 11 years, the bulk of those jobs have been replaced by business expansion at the Loring Commerce Center. Cleaves expects MMA's employment rolls to reach 1,000 within the next three years.
Cleaves credits MMA's employees with helping expand the organization's reputation, which he says is directly responsible for bringing in more work. He characterizes the employees as extremely hard workers, and says they bring a level of ingenuity to the operation that helps keep costs down. "The big thing is the productivity of your people," says Cleaves. "The work ethic of people up here is amazing."
And saving money is MMA's best strategy for growth, says Cleaves, because low overhead allows the organization to offer attractive bids on contracts. He estimates his hourly rate is less than $40 ˆ roughly the same as the average neighborhood mechanic. Part of that is the efficiency of the workers, says Terry Susee, MMA's director of quality and training, but MMA workers also have figured out ways to trim the costs of rebuilding each vehicles. (See "Geared toward efficiency," p. 33.) For instance, five years ago MMA set up a decal shop where workers could recreate vehicle data plates and warning decals that might cost hundreds of dollars to purchase from an outside vendor. MMA's cost? "Pennies on the dollar," says Susee. And with a full metal fabrication shop, MMA employees have been manufacturing certain Humvee body parts and components that perform to specification, but cost just a fraction of what a company like AM General might charge. "Anything we can save money on, we do it," says Susee.
As a result, Cleaves says MMA can turn out a completely rebuilt Humvee ˆ from full-body teardown to fully stocked rebuild ˆ in three days at a cost of $24,000. That compares to a base price of $77,000 for a new Humvee. Meanwhile, rebuilding costs are considerably higher elsewhere: A recent article in National Defense magazine, the monthly journal of the Arlington, Va.-based National Defense Industrial Association, reported that refurbishing a Humvee through an Army depot like Red River costs an average of $39,000. "Nobody can beat us on an hourly rate," says Cleaves.
In addition to the military work, Cleaves also is looking for new ways to keep MMA growing. His newest plan is to tap the municipal market: He'd like MMA to be the official repair outfit for municipal plow fleets, and the place where Maine towns send their school buses when they need a major overhaul. He says he's tested the waters with the Maine Department of Education, and is currently working on proposals to submit to school departments and municipalities.
In the end, though, Cleaves isn't worried about the number of contracts MMA will receive from the National Guard and Army going forward. After all, he says the National Guard estimates 88,000 Humvees will need to be rebuilt and repaired during the next 15 years. In his view, the MMA is well positioned to be chosen for a portion of that work. "If the war was over tomorrow, the Army would stop buying new stuff," Cleaves says. "They'd have to repair the old stuff."
Mainebiz web partners
Most Recent
Most Recent
Comments